Some news from China about standards
China rekindles plans for CDMA mobile networks
By Matt Pottinger
BEIJING, Nov 22 (Reuters) - China has revived plans to build mobile phone networks based on U.S. technology following progress in a royalty dispute with Qualcomm Inc and the signing of a WTO pact with Washington, industry executives said on Monday.
China Unicom, the country's number two state-owned telephone company, had announced ambitious plans in March to begin rolling out a nationwide CDMA (Code Division Multiple Access) network by the end of this year.
The U.S.-pioneered standard was meant to give China Unicom a technological leg up on rival China Telecom, which uses the older GSM (Global System for Mobile Communications) standard that has been promoted by European firms Ericsson and Nokia (NYSE:NOK - news).
Beijing's embracement of CDMA, manufactured by U.S. companies Motorola (NYSE:MOT - news) and Lucent Technologies (NYSE:LU - news) among others, was also considered a political gift to Washington on the eve of sensitive World Trade Organisation negotiations in April.
But the plan soon bogged down when San Diego-based Qualcomm (NasdaqNM:QCOM - news), a key CDMA patent holder, and Chinese telecommunications officials locked horns over royalty fees and other technology transfer issues, U.S. industry sources said.
The problem was compounded when Sino-U.S. ties, already smarting from failed April WTO talks, were stretched to their thinnest point in a decade after U.S. bombs ripped through the Chinese embassy in Yugoslavia during a NATO air strike in May.
UNICOM SEES 30 MILLION SUBSCRIBERS BY 2003
But Qualcomm and Beijing have since made some progress in their dispute, and China Unicom has issued requests for sales proposals from a dozen CDMA vendors, industry executives said.
At the same time, the U.S.-China WTO pact signed last week would also make it easier for China to adopt CDMA.
``Their plans are very aggressive right now,' said Perry LaForge, executive director of the CDMA Development Group in Costa Mesa, California.
``Unicom announced plans for 2003 to have 30 million customers and close to 40 million subscriber capacity,' LaForge quoted top Unicom executives as telling him in Beijing last week.
He cited WTO and ``substantive discussions' between Qualcomm and Chinese officials for the renewed bullishness on CDMA.
Several foreign companies confirmed receiving recent requests from China Unicom for information on CDMA equipment and network configurations. Such requests are often the first step before detailed price quotations and contract bids.
``They did issue requests for information,' said David Ho, senior vice president in China for Canada's Nortel Networks (Toronto:NT.TO - news). ``It's a preliminary step.'
Other companies that have been approached by Unicom include Motorola and Lucent, South Korean vendors Samsung and LG Information and Communications Ltd , and Japan's NEC Corp and Fujitsu , industry sources said.
In addition, several Chinese companies have been contacted, including Datang, Eastern Communications Co Ltd , which has a CDMA joint venture with Motorola, and Shanghai Bell, which is partnered with Alcatel of France.
``You'll see a very significant ramp up next year,' said LaForge. ``Just in terms of equipment orders, this represents multi-billions of dollars,' he said.
STUMBLING BLOCKS REMAIN FOR U.S. VENDORS
But stumbling blocks remain on the path to a speedy roll out, and U.S. companies could suffer most if the royalty issue goes unresolved, executives said.
Qualcomm last year offered discounts on royalty fees to Chinese manufacturers as an incentive for China to open the market to CDMA, industry analysts said.
But in March, Qualcomm agreed to sell its equipment manufacturing division to Ericsson of Sweden and -- to the annoyance of the Chinese -- rescinded the discount offer.
Some executives said they believed Unicom might dangle contracts before local and South Korean vendors in order to spur U.S. suppliers to exert pressure on Qualcomm.
``Korean vendors may get a much bigger share than they would have,' said an executive at one Western firm.
China Unicom and Qualcomm did not respond to interview requests.
Vendors also fear Unicom, struggling to unwind $1.4 billion in contracts with other foreign telecommunications companies, may be too short on cash to meet its goals.
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